Where
Is Your Tax Home?
Revised By: Sue Kieval, E.A.
The
Henssler Financial Group Position Paper
The determination of a tax home is made on an individual basis. A husband and wife could each have a separate tax home, if they each have a principal place of business at different locations.
Generally, a taxpayer's tax home is the location of his/her permanent residence. The IRS has often interpreted one's tax home to be the location of the taxpayer's principal place of business. The Second, Fifth, Sixth and Ninth Circuit courts, however, have all rejected or limited the IRS's interpretation of the term "home." These courts maintain that a taxpayer's tax home is the location of his permanent abode or residence.
The Supreme Court has refused to settle the issue. However, the dissenting opinions have agreed with the above Circuits by interpreting "home" as the taxpayer's permanent abode or residence. However, the Supreme Court did hold, that the taxpayer's costs for travel, etc., to work elsewhere from his tax home were nondeductible, because they were a result of the taxpayer's personal choice to live away from the principal post of duty, rather than as a result of business exigencies. (I know some of your eyes were lighting up with the possibilities until you read that line.)
Moving to Florida — or Any State without Income Tax?
Many of our clients reside in Georgia during their working years. This is their residence and tax home. At some point, they may purchase a second home in Florida. Florida, as many of you know, does not have an income tax. If you are thinking of moving to Florida in your retirement years, do not automatically assume that it is less expensive from a tax standpoint to move there. Florida has higher sales tax in some cases and higher gasoline taxes, etc. Georgia has a retirement income exclusion per taxpayer of $30,000 for 2007 and $35,000 for 2008. Up to $4,000 of earned income, as well as interest, dividends, capital gains and pension income can be excluded from Georgia taxable income at age 62. In addition, state income tax is not paid on social security income. Do not automatically assume that you will pay less tax if you move from Georgia to Florida.
Change of Residency
If you decide that you are spending more time in Florida than in Georgia, and you wish to make the move establishing your Florida home as your permanent residence and your Georgia home as a vacation home, you should "dot your I's and cross your T's:"
- File a declaration of domicile with the Clerk of the Circuit Court in the county of Florida in which you reside.
- Surrender your Georgia driver's license, and obtain a Florida driver's license.
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Change all applicable documents to include your new place of domicile — passports, contracts, deeds, leases, credit applications, etc.
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Register your motor vehicles in Florida.
- Transfer your checking and savings accounts to Florida.
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Notify all social and religious organizations of your change of address. Obtain non-resident memberships at Georgia clubs.
- Obtain a safe deposit box in Florida, and move the appropriate documents and items.
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Register to vote in Florida, and vote.
- Remove your name from the Georgia voter rolls.
- File tax returns with your Florida address; file the Florida Intangible Property tax return.
- Revise your will to reflect Florida as your state of domicile.
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Rescind your Georgia Homestead exemption; claim the Florida Homestead exemption. (To be eligible to claim the Florida Homestead exemption you must be in Florida more than 182 days.)
Not Moving — But Not At Home?
If you really must work away from your home on a temporary basis, please review the IRS's publications on Travel and Business Expenses. There are situations where you can take legitimate deductions while living away from home. If you would like further information regarding this topic or any other tax related issue, please contact The Henssler Financial Group Tax & Accounting Division at 770-428-4025.